On Friday, spot yuan traded at 7.1475 per dollar at midday, almost unchanged from the previous late session close and leaving it with a 0.1% advance for the week if it holds that level till the close.

The currency had its worst month in 25 years in August as China and the United States ramped up the trade war, and the People's Bank of China has used the daily fixing to brake the yuan's decline .

The PBOC set the yuan's daily midpoint - the spot rate can trade 2% either side - at 7.0855 per dollar, stronger than the Reuters' estimate of 7.1003.

"This reflects the central bank's attitude at this stage to keep the yuan relatively stable," said a currency trader in Shanghai. "Moving forward, (the exchange rate) will depend on supply and demand and how the trade talks go."

With the Chinese National Day on October 1, Beijing was unlikely to escalate the trade war further and should keep the yuan stable, said another trader at a Chinese bank in Shanghai.

The offshore yuan was trading 0.05 percent firmer than the onshore spot at 7.1436 per dollar.

The Thomson Reuters/HKEX Global CNH index <.RXYH>, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 91.01, unchanged from Thursday.

The dollar was bolstered on Friday by encouraging U.S. economic data, which could also be supportive for the yuan as it reduced some of gloom over the global economy, but analysts said it could also push back expectations for U.S. interest rate cuts and give U.S. negotiators confidence to drive a harder bargain in the trade talks.[FRX/]

"A relatively stronger U.S. economy is viewed as counterproductive for trade talks because it encourages U.S. President Trump to play hardball and push back Fed cut expectations," DBS bank analysts said in a note.

The yuan market at 4:00AM GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 7.0855 7.0852 0.00%

Spot yuan 7.1475 7.1499 0.03%

Divergence from 0.88%

midpoint*

Spot change YTD -3.84%

Spot change since 2005 15.80%

revaluation

Key indexes:

Item Current Previous Change

Thomson 91.01 91.01 0.0

Reuters/HKEX

CNH index

Dollar index 98.416 98.414 0.0

*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 7.1436 0.05%

*

Offshore 7.2018 -1.61%

non-deliverable

forwards

**

*Premium for offshore spot over onshore

**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. .

(Reporting by Noah Sin; Additional reporting by Jindong Zhang in Shanghai; Editing by Simon Cameron-Moore)